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A
dip in iron ore prices as European markets began trading helped
weaken higher-risk currencies including the Australian and
Canadian dollars.
The index that measures the broader strength of their U.S.
counterpart was trading almost half a percent above Monday's
four-and-a-half month low but it was up just 0.1 percent on the
day after a volatile Asian session.
The yen, which has gained 4 percent in nine days as faith in the
Trump White House's ability to deliver tax reform and a promised
public spending boost, was flat at 110.74 yen per dollar.
Analysts pointed to support from appearances by Dallas Federal
Reserve Bank President Robert Kaplan and Chicago Fed chief
Charles Evans as putting the emphasis back on the prospect of
more rises in U.S. interest rates.
"Clearly we shouldn't forget we are going to see at least two
more hikes by the Fed this year and that there is still the
potential for the next one to be pulled forward to June," said
CIBC strategist Jeremy Stretch.
"There is probably also a realization that after the vote on
Friday, it may well be the case that Trump's moving away from
healthcare reform and toward fiscal issues may be constructive
from a market perspective."
The Republicans' failure to pass a replacement for Obamacare was
the trigger on Monday for a deepening of doubts about the Trump
administration's ability to pass other legislation through
Congress.
Masafumi Yamamoto, chief forex strategist at Mizuho Securities
in Tokyo said those concerns meant the bias remained toward more
dollar weakness.
"But a one-way drop by the dollar is also unlikely as the
Republicans cannot face midterm elections in November of next
year without enacting a single fiscal stimulus step," he said.
The euro was down just 0.1 percent at $1.0854, after reaching
$1.0906 in the previous session, its highest since Nov. 11.
The Aussie, battered by the weakening in global sentiment and a
fall in the prices China pays for its iron ore, was down 0.3
percent.
(Writing by Patrick Graham; editing by Richard Lough)
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